Part 1: Importation of Intangible Goods

By : Riza Buditomo


1. Brief

As you may be aware the Minister of Finance issued Minister of Finance Regulation No. 190/PMK.04/2022 on Self-Consumed Imported Goods ("MOF Reg  190") which takes effect on 14 January 2023.

This regulation provides a new import declaration submission mechanism of consumed goods in the form of intangible goods, e.g., software for server products or other digital goods, which include software and digital goods that are transmitted electronically. This regulation is a complementary of MOF regulation which issued the infamous Chapter 99.

So, imported goods are not only in the form of tangible goods but they also in the form of intangible goods


2. Summary of MOF Reg 190

Under MOF Reg. 190, the import of intangible goods to Indonesia, such as software and other digital goods that are transmitted electronically, is subject to Import Declaration (PIB) requirements. This is not a new requirement per se but this is now being specifically set out in MOF Regulation 190. The regulation, however, lacks specifics on the software types that are liable to import duties and taxes.

The situation is still fluid but the Customs officials have started to interpret the intangible goods as the following:

  1. Software and other digital goods not related to machines or devices that have been or will be imported;
  2. Software and other digital goods related to machines or devices that have been or will be imported are classified with those machines or devices; and
  3. Software and other digital goods which are updates or upgrades to the software for machines or devices that have been previously imported.

According to MOF Reg. 190, Customs officials may question whether or not the software is related to the imported goods. In addition, Customs officials would also question whether the software is a service or downloadable.

III. Recent Experience

It is important to note that MOF Reg 190 is a gate opener for customs auditors to look further details of importation, in posting journal entries, in consistency of payments to vendor or of inter- company charges etc. In recent experience (a customs audit) they have been very active in checking payment schedules related to purchase of software or services to include them as dutiable goods.

Customs officials also questioned whether the software is a service or downloadable software as well as conducting below checking:

  1. Trying to link the value of software to the machine/device that has been imported, hence the customs value may be Subsequently, there may be an underpayment of import duty and taxes, and a penalty.
  2. If it is not related to the imported goods, the software value should be stated in the PIB, and the software importer should pay the import taxes

The Customs auditors also tried to include any intangible importation prior to MOF Reg 190 and simply trying to implement MOF Reg 190 retroactively. (of which we think that should not be the case).

We anticipate that these patterns will persist in Indonesia for the upcoming years since audits are becoming routine. Additionally, we observe a tendency where audits are conducted biennially, immediately following the previous one.